A day after short seller firm Kerrisdale put Bitcoin miner Riot Platforms in its crosshairs, the company's share price has largely shrugged off the sharp drop it saw yesterday.

Bitcoin miners play a crucial role in the network by validating and securing transactions. They use powerful computers to solve complex mathematical problems, which confirms transactions and adds them to the blockchain—a public ledger. This can be done on a small scale, with a single mining rig. But there are now many large-scale publicly traded BTC miners like Riot Platforms, Marathon Digital (MARA), and CleanSpark (CLSK).

At the time of writing, Riot's stock—which trades on the Nasdaq under the RIOT ticker—has worked its way back up to $9.65 in pre-market trading. That's level with its Tuesday, June 4 close of $9.67, but still 1% shy of its $9.78 open on Wednesday morning.

But make no mistake: The initial blow on Wednesday was significant. After the opening bell on Wednesday, RIOT saw its share price plunge as low as $8.81 within an hour—right after Kerrisdale Capital, a New York-based short seller firm, announced its short position.


It did so with a report predicting a "mine collapse," citing shifting crypto sentiment in Texas and increased pressure to keep rigs profitable in the wake of the latest Bitcoin halving.

"Gone are the days when investors searching for a Bitcoin proxy had to settle for a Bitcoin miner," the firm writes. "With numerous low fee Bitcoin ETFs and ETPs, why own shares in a company like Riot, which has seen Bitcoin holdings per share and Bitcoin production per share steadily decline, versus simply owning Bitcoin itself."

That's putting it lightly. In an interview with Yahoo Finance, Kerrisdale Capital CIO Sahm Adrangi was a little more blunt.

"Our investment thesis is that this sector is not going to be around in five years," he said. "Bitcoin mining is one of the stupidest business models we've come across in our time short selling over the past 15 years."


It's no big surprise that the Texas Coalition Against Cryptomining piled on to celebrate that Riot Platforms was recently denied property tax abatements for its huge footprint in Navarro County. There were plenty of Bitcoin and Bitcoin mining defenders who piled into the firm's replies to argue that a bet against Bitcoin mining—which is necessary for the Bitcoin network to operate—is a bet against BTC.

Reed College philosophy professor Troy Cross, a well-known Bitcoiner, said on Twitter that he agrees with Kerrisdale on one point: That BTC mining is an insanely competitive pure commodity business and buying shares of mining companies should never be used as a proxy for BTC.

Instead, he argued, investors should consider buying Bitcoin miner shares during times of upward volatility; if a miner has diversified into other revenue streams, like AI and other high-performance computing; or as a buffer against an upcoming Bitcoin mining adjustment.

"The fact that they see none of this nuance," he wrote about Kerrisdale, "disqualifies everything else they have to say."

It's a common pattern for short seller firms to open short positions and then publish reports to convince other investors the share price will tank. Which, of course, often causes the share price to tank. In March, Kerrisdale predicted the age of holding Microstrategy shares as a proxy for Bitcoin had come to an end for many of the same reasons it's bet against Riot.

In February, fellow short seller Citron Research (which has had a lot to say about Roaring Kitty's return) announced its short position on Coinbase after it experienced an outage during price volatility. And last spring, notorious short-selling firm Hindenburg Research, went after Block Inc. to claim it embraced predatory offerings and compliance worst-practices."


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